** FT News **
* France suspends Russian warship delivery | Hollande toughens his stance over the controversial arms sale
Portfolio flows to emerging markets rebounded in November after several months of weakness, according to the latest EM Portfolio Flows Tracker from the Institute of International Finance. Flows for the month were estimated at $25.5bn, consisting of $8.8bn to bonds and $16.7bn to equities, the IIF said.
Bahrain, Angola, Ecuador and Venezuela rank as the emerging markets (EM) most vulnerable to a downgrade in their sovereign credit ratings if oil prices do not recover in 2015, Fitch Ratings said in a report published on Tuesday.
With benchmark Brent crude prices close to $80 a barrel, down from $115 a barrel in mid-June, the revenues of all oil producers are under pressure. But due to differing levels of fiscal reliance on oil income, the speed of deterioration in domestic budgetary conditions varies sharply among EM producers. Read more
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South Korea’s small and medium sized enterprises have been losing competitiveness over the past several years, mirroring the declining power of its big export-based conglomerates called chaebol that have driven the country’s economic growth.
A report by the Korea Small Business Institute suggests businesses have failed to take advantage of government programmes to support SMEs and have shown a lack of innovation as they struggle to prosper in a sagging economy. Read more
As Alan Beattie wrote recently, a clear divergence in monetary policy is polarising the emerging market (EM) universe. Some countries, such as China last Friday, have cut interest rates to invigorate demand while others, such as Russia and Brazil, have had to hike rates to battle inflation.
The divide is growing starker, forming a basic template for EM investors. Softer oil and commodity prices are subduing inflation in most countries, creating room for easier monetary conditions. Other countries, however, are still struggling with ideosyncratic frailties, preventing them from capitalising on the ebbing EM prices. Read more
As Peru’s economy struggles to regain its former ebullience, the government has again stepped in, this time with a stimulus package worth an estimated $4bn next year or about 2 per cent of gross domestic product. Much of the money comes in tax breaks but the package also includes about $1bn in bond issuance to help pay for government investment, poverty relief and job creation.
The package of measures – the fourth to be announced this year, and still subject to final approval in Congress – was unveiled last week by Alonso Segura, finance minister, just two months after he replaced the widely-respected Luis Miguel Castilla, who resigned unexpectedly in September. Read more
Another reminder of the challenges facing Dilma Rousseff as she struggles to put together an economic team for her second term in office: consumer confidence is at its lowest ebb since the depths of the global financial crisis in December 2008.
Is Brazil’s Workers’ Party, victorious in last month’s elections, ready to back any decision by President Dilma Rousseff to hire Joaquim Levy as finance minister?
Speculation over his likely appointment leaked last Friday into local media, sending financial markets higher.
With a doctorate in economics from the University of Chicago and a previous successful stint as treasury secretary under former President Luiz Inácio Lula da Silva in 2003, Levy seems to be exactly the type of professional that financial markets were hoping might be appointed. Read more
By Jonathan Fenby, Trusted Sources
Far from fading away, the anti-corruption campaign launched two years ago by China’s leader, Xi Jinping, is widening and has all the appearance of being seen by Xi and his colleagues as a regular instrument of governance.
It has, of course, involved getting rid of high-profile politicians such as the former security chief, Zhou Yongkang, and the maverick Bo Xilai, along with their associates. But, in keeping with Xi’s declared aim of going for both “flies” and “tigers”, it is also seen by the leadership as a means of cutting lower-level bad apples out of Communist Party.
What is intriguing is the question of whether Xi and his principal enforcer, Discipline Commission chief Wang Qishan, see it as a means of making the state sector more efficient. Read more
Serbia’s long-awaited new deal with the IMF should bolster investor confidence in the country but the substantial fiscal tightening that the Fund has prescribed will prove politically difficult to implement.
On November 20, the Fund announced a new 36-month standby agreement for Serbia worth around €1bn, with the package expected to be in place from January 1, pending final approval. The deal foresees Serbia reducing its budget deficit from 8 per cent of GDP in 2014 to between 4 and 4.25 per cent by 2016. Dusan Vujovic, Serbia’s finance minister, said this would require savings of around €1.3bn to €1.4bn. Read more
As Dilma Rousseff struggles to assemble a new economic team after the bitter political strife that led to her re-election by a thin margin, a tension has built up between continuity and change.
The divide between the “more of the same”, “nothing is wrong” discourse that Dilma’s marketing gurus had her voice during the campaign and the no-nonsense imperatives of economic reality that compel her to shift course is now a major cause of dispute in her own political support base. Read more
** FT News **
* Shadow trading signals financial crisis in Ukraine | Calls for international bailout as Russian pressure and plunging currency create a toxic mix for Kiev
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